66Application

(a)Tax on taxable income in the 1997-98 or subsequent income years; and

(b)Supplies made in taxable periods commencing on or after 1 April 1997; and

(c)Gifts made on or after 1 April 1997; and

(d)Races run, lotteries drawn, dutiable games played by means of a gaming machine and casino wins to which the Gaming Duties Act 1971 applies that occur on or after 1 April 1997; and

(e)Instruments of conveyance executed, bills of exchange made, drawn or prepaid under sections 81, 82, or 83 of the Stamp and Cheque Duties Act 1971 and liable transactions entered into on or after 1 April 1997.

(3)Sections 68(3), 68(6), 80, 83, 98 and 102 of this Act apply to the 1998-99 and subsequent income years.

(4)Section 87 of this Act is deemed to have applied on and after 1 April 1995.

67Interpretation

In section 3(1), the following is inserted before the definition of accounting period:

“Acceptable interpretation, in sections 141A and 141C of this Act means an interpretation that is not an unacceptable interpretation.”.

68Interpretation

(1)In section 3(1), the definition of civil penalty is replaced by the following:

“Civil penalty means—

“(a)A late filing penalty; or

“(b)A late payment penalty; or

“(c)A shortfall penalty.”.

(2)In section 3(1), the definition of late payment penalty is replaced by the following:

“Late payment penalty means,—

“(a)A civil penalty imposed under section 139B for not paying on time a tax calculated or assessed as payable under a tax law; and

“(b)For the purposes of sections 157, 183A, 183B, and 183D, includes:

“(i)Additional tax imposed on unpaid tax under section 139 of the Tax Administration Act 1994 for the 1996-97 or earlier income years:

“(ii)Additional tax imposed on any tax remaining unpaid under section 41 of the Goods and Services Tax Act 1985 in relation to supplies made in taxable periods which commenced before 1 April 1997:

“(iii)Interest on gift duty imposed under section 84 of the Estate and Gift Duties Act 1968 in relation to gifts made before 1 April 1997:

“(iv)A penalty imposed in relation to unpaid stamp duty under section 58 of the Stamp and Cheque Duties Act 1971 or any interest imposed under section 86E on unpaid credit card duty in relation to—

“(A)An instrument of conveyance executed; and

“(B)A bill of exchange made, drawn, or prepaid under sections 81 to 83 of that Act; and

“(C)A liable transaction entered into—

before 1 April 1997:

“(v)Interest on unpaid totalisator duty under section 8 of the Gaming Duties Act 1971 in relation to all betting profits required to be calculated under section 4 of the Gaming Duties Act 1971 before 1 April 1997:

“(vi)Interest on unpaid racing duty under section 12 of the Gaming Duties Act 1971 in relation to lotteries drawn before 1 April 1997:

“(vii)Interest on unpaid gaming machine duty under section 12F of the Gaming Duties Act 1971 in relation to dutiable games played by means of gaming machines before 1 April 1997:

“(viii)Interest on unpaid casino duty under section 12Q of the Gaming Duties Act 1971 in relation to casino wins before 1 April 1997”.

(3)In section 3(1), the definition of tax position is amended by adding the following:

“(k)The estimation of the provisional tax payable.”.

(4)In section 3(1), the definition of tax shortfall is replaced by the following:

“Tax shortfall, for a return period, means the difference between the tax effect of—

“(a)A taxpayer's tax position for the return period; and

“(b)The correct tax position for that period,—

“when the taxpayer's tax position results in too little tax paid or payable by the taxpayer or another person or overstates a tax benefit, credit, or advantage of any type or description whatever by or benefiting (as the case may be) the taxpayer or another person”.

(5)In section 3(1), the definition of taxpayer's tax position is replaced by the following:

“Taxpayer's tax position means,—

“(a)Unless paragraph (b) applies, a tax position taken by a taxpayer in or in respect of—

“(i)A tax return; or

“(ii)A due date:

“(b)If—

“(i)The tax is income tax; and

“(ii)The taxpayer alters a tax position taken in a return before the earlier of—

“(A)The issue of an assessment in respect of the tax; and

“(B)The due date for payment of the tax—

the tax position the taxpayer takes in the last amended tax return received by the Commissioner before the issue of the assessment or before the due date, whichever applies:”.

(6)In section 3(1), the definition of underestimation penalty is repealed.

70Dates by which annual returns to be furnished

71Officers to maintain secrecy

“(7)In this section tax or duty, taxes or duties, and tax and duty include any financial support within the meaning of the Child Support Act 1991 and any amount payable under the Student Loan Scheme Act 1992.”.

72Secrecy obligations not to prevent disclosure in arrangements for relief from double taxation and exchange of information

“88

Notwithstanding any obligation of secrecy imposed by any enactment, the Commissioner may disclose such information as is required to be disclosed under a double tax agreement to a person authorised to receive such information under the law of the territory in relation to which the double tax agreement has been made.”.

76Commissioner may make product rulings

“(d)The matter on which the ruling is sought is being dealt with, or in the Commissioner's opinion should be dealt with, by one or both competent authorities of the parties to a double tax agreement; or”.

(4)Subsection (3) comes into force on the date on which this Act receives the Royal assent.

77Assessment of further income tax

“(3)An assessment made under this section shall be subject to challenge in the same manner as an assessment of income tax and Part VIIIA of this Act shall apply, so far as may be, to a challenge to an assessment made under this section as if the terms income tax and tax in that Part included the further income tax for which a company may be chargeable under section ME 9 of the Income Tax Act 1994.”.

78Time bar for amendment of assessments

“107A

“(1)When any person has made returns and has been assessed for income tax for any year, it shall not be lawful for the Commissioner to alter the assessment so as to increase its amount after the expiration of 4 years from the end of the year in which the notice of original assessment was issued.

“(2)Notwithstanding subsection (1), in any case where, in the opinion of the Commissioner, the returns so made are fraudulent or wilfully misleading or omit all mention of income which is of a particular nature or was derived from a particular source, and in respect of which a return is required to be made, it shall be lawful for the Commissioner to alter the assessment (being an assessment made on or after 1 April 1958) at any time so as to increase the amount of the assessment.

“(3)Subsections (1) and (2) apply to a return filed in the period between 1 October 1996 and 31 March 1997, and, for such a return, a reference to section 108 of this Act is deemed to be a reference to this section.”.

(2)Subsection (1) is deemed to have come into force on 1 October 1996.

81Commissioner determination of provisional tax

“(b)The Commissioner considers, by reason of any of sections HK 26(2), HK 26(3), LC 1, LC 4, and LC 5 of the Income Tax Act 1994, or by reason of any double tax agreement, that the provisional tax that would be payable by the person is excessive,”.

82Purpose of specific provisions

In section 120J, “sections 120K to 120U”, whenever it occurs, is replaced by “sections 120K to 120V”.

83Instalments of and due dates for provisional tax

“120K

“(1)Except where this section requires otherwise, in an income year, other than a transitional year, the income tax liability of a provisional taxpayer is due and payable in equal instalments on each of the 3 instalment dates of the income year.”.

(2)In section 120K(3), “, other than in a transitional year,” is inserted after “The income tax liability of a new provisional taxpayer”.

“(4)The income tax liability of a provisional taxpayer who is a natural person, other than in that person's capacity as trustee, with residual income tax not exceeding $30,000 for that income year and—

“(a)Has not provided an estimate of the person's residual income tax under section MB 3 of the Income Tax Act 1994; and

“(b)Has not, at any time during the income year, held a valid certificate of exemption issued under section NF 9(12) of the Income Tax Act 1994—

“is due and payable in one instalment on the taxpayer's terminal tax date.

“(4A)In a transitional year, the income tax liability of a provisional taxpayer, other than a natural person to whom subsection (4) applies, is due and payable as follows:

“(a)On the instalment date or dates determined in accordance with section MB 5A of the Income Tax Act 1994;

“(b)Subject to paragraph (c), the amount payable on the instalment dates determined in paragraph (a) is calculated according to the following formula:

4 x i m

where—

iis the income tax liability for the transitional year; and

mis the number of months in the transitional year:

“(c)The amount payable on a final instalment date is determined in accordance with section MB 5(11) of the Income Tax Act 1994, being the amount of the income tax liability for the income year less any amount of income tax liability treated as due on an instalment date determined under paragraph (b).

“(4B)For the purposes of this Part, the income tax liability of a provisional taxpayer who is a natural person and to whom sections 120K(1) or 120K(4) do not apply shall be treated as due and payable on the taxpayer's terminal tax date.

“(4C)Notwithstanding section 59(3), subsection (4B) is deemed to apply to the 1997-98 income year.”.

(4)In section 120K(5), the definition of person incorrectly assumed to be a provisional taxpayer is repealed.

85Amount in nature of interest to be added to fringe benefit tax paid on annual income year basis

“(4)In calculating interest on overpaid fringe benefit tax under this section, date interest starts is to be construed as if the later of the following days and subparagraph (ii) were omitted from paragraph (b).”.

86Interest on excess deductions of resident withholding tax

“120V

If the Commissioner is required to make a refund of excess resident withholding tax under section NF 7 of the Income Tax Act 1994, no interest shall be payable by the Commissioner under section 120D(3) on the excess refunded.”.

90Underestimation penalty where income tax underestimated as at final instalment date

“(2)When the income tax is reassessed for an income year, the amount of an underestimation penalty imposed for that year shall not be increased beyond the amount of any underestimation penalty previously imposed for that year.”.

91Underestimation penalty where income tax underestimated as at final instalment date

“(14)For the purposes of determining the amount of a tax shortfall in relation to an instalment date and a provisional taxpayer, the tax shortfall shall be the difference between—

“(a)The lesser of—

“(i)The amount of provisional tax payable on the instalment date if an estimate had not applied at that instalment date; and

“(ii)The amount that would have been payable on that instalment date if the taxpayer's provisional tax payable for the income year had been the taxpayer's residual income tax liability for the income year; and

“(b)The amount of provisional tax payable on that instalment date as determined by the estimate applying as at that instalment date.”.

“(A)The net loss of a taxpayer in respect of the return period, ascertained in accordance with the provisions of the Income Tax Act 1994, are to be used in this subsection as if they had a positive value; and.”

96Commissioner to determine portions in which shortfall penalty payable by taxpayer and officers of taxpayer

“141F

“(1)If—

“(a)A taxpayer is required to make or account for a deduction or withholding of tax under a tax law; and

“(b)An officer of the taxpayer fails to make a deduction or withholding of tax under a tax law or applies or permits to be applied the amount of the deduction or withholding of tax other than in payment to the Commissioner,—

“one shortfall penalty, calculated in accordance with this Part, may be imposed in respect of each tax position taken by the taxpayer.

“(2)If the Commissioner determines that a shortfall penalty is required to be imposed, the Commissioner may determine the portion that each of the taxpayer and the officers is to be liable for that penalty having regard to—

“(a)The acts or omissions of the taxpayer and the officers; and

“(b)Whether those acts or omissions were reasonable in the circumstances of the case.”.

99Deduction of tax from payments due to defaulters

“157

“(1)Where a taxpayer has made default in the payment to the Commissioner of any income tax (or a part of any income tax) or any interest under Part VII payable by the taxpayer or any civil penalty (or a part of any civil penalty) incurred by the taxpayer, the Commissioner may from time to time by notice in writing require any person to—

“(a)Deduct or extract, in one sum, from any amount that is, or becomes, an amount payable in relation to the taxpayer such sum as is equal to the lesser of—

“(i)The amount that, according to the notice, is required to be deducted or extracted:

“(ii)The amount that, at the time at which the deduction or extraction is required to be made in compliance with the notice, is the amount payable in relation to the taxpayer:

“(b)Subject to subsection (3), deduct or extract from time to time, by way of instalment, from any amount that is, or from time to time becomes, an amount payable in relation to the taxpayer such sum as is equal to the lesser of—

“(i)The amount that, at the time at which the deduction or extraction is required to be made in compliance with the notice, is the amount required to be so deducted or extracted:

“(ii)The amount that, at the time at which, according to the notice, the amount of the instalment is required to be deducted or extracted, is the amount payable,—

and require that person to pay to the Commissioner, within such time as is specified in the notice, every sum so deducted or extracted, to the credit of,—

“(c)To the extent that that sum is in respect of or in relation to income tax (or any part of any income tax) or any interest under Part VII assessed on an income tax liability, the taxpayer who has that income tax liability:

“(d)To the extent that that sum is in respect of or in relation to the whole or any part of a tax deduction or interest payable to the Commissioner or a civil penalty, an account maintained by the Commissioner in relation to that tax deduction or that interest or that civil penalty.

“(1A)A notice of amount to be deducted or extracted issued under subsection (1) may include a daily amount of interest as well as the amount required to be deducted or extracted.

“(1B)The daily amount of interest notified under subsection (1A) shall be calculated for each day, commencing on the date of the notice and ending on the day on which the sum required by the notice is deducted or extracted.”.

(2)In section 157(10), in the definition of income tax paragraph (a) is replaced by:

“(a)Income tax payable under the Income Tax Act 1994 and the Income Tax Act 1976:”.

103Relief from additional tax incurred due to default in payment of tax

(2)Notwithstanding subsection (1), a remission may be made under section 182 if the Commissioner considers that the request for the remission is received before the date on which this Act receives the Royal assent.

104Amendment to application date

“183ARemission for reasonable cause

“(1)The Commissioner may remit a late filing penalty or a late payment penalty or an imputation penalty tax imposed under section 140B or a dividend withholding payment penalty tax imposed under section 140C if—

“(a)The Commissioner is satisfied that the late filing or late payment was caused by an event or circumstance beyond the control of the taxpayer that provides the taxpayer with a reasonable justification or excuse for not providing the tax return or paying the tax on time; and

“(b)The taxpayer files the required tax return or pays the unpaid tax as soon as practicable.

“(2)Without limiting the Commissioner's discretion under subsection (1), an event or circumstance may include—

“(a)An accident or a disaster; or

“(b)Illness or emotional or mental distress.

“(3)An event or circumstance does not include—

“(a)An act or omission of an agent of a taxpayer, unless the Commissioner is satisfied that the act or omission was caused by an event or circumstance beyond the control of the agent—

“(i)That could not have been anticipated; and

“(ii)The effect of which could not have been avoided by compliance with accepted standards of business organisation and professional conduct; or

“(b)A taxpayer's financial position.

“183BCancellation of late payment penalties under instalment arrangement

“(1)The Commissioner must cancel a taxpayer's liability to pay—

“(a)60% of an initial late payment penalty; or

“(b)An incremental late payment penalty.

“(2)The Commissioner must cancel a taxpayer's liability under subsection (1) only if—

“(a)The tax to pay in respect of which the taxpayer would otherwise have had the liability is—

“(i)Tax payable in 2 or more instalments under an arrangement with the Commissioner; or

“(ii)Tax in respect of which deductions are to be made and paid to the Commissioner under section 157 of this Act or section 43 of the Goods and Services Tax Act 1985 or any other similar tax law; and

“(b)The taxpayer complies with the taxpayer's obligations under the arrangement; and

“(c)The liability would otherwise have arisen after—

“(i)The arrangement was entered into; or

“(ii)The Commissioner exercised powers available to the Commissioner under section 157 of this Act or section 43 of the Goods and Services Tax Act 1985 or any similar tax law.

“183CCancellation of interest

“(1)Subject to subsection (3), a taxpayer's liability to pay interest under Part VII is cancelled for the period from the date of a notice of assessment until the due date specified in the notice if—

“(a)The Commissioner issues the taxpayer with a notice of assessment; and

“(b)The tax assessed in the notice, together with any interest payable under Part VII in respect of the period before the date of the notice, is paid to the Commissioner by the due date for payment specified in the notice.

“(2)Where a taxpayer challenges an assessment by commencing proceedings under Part VIIIA, the taxpayer's liability to pay interest under Part VII on non-deferrable tax is cancelled for the period from the date of the notice until the due date specified in a notice of assessment if—

“(a)The Commissioner issues the taxpayer with a notice of assessment; and

“(b)The non-deferrable tax in relation to the tax assessed in the notice, together with any interest payable under Part VII in respect of that non-deferrable tax, is paid to the Commissioner by the due date for payment specified in the notice.

“(3)Where—

“(a)The Commissioner issues a notice of assessment to a taxpayer before the original due date for payment of the tax to which the assessment relates; and

“(b)The tax assessed in the notice, together with any interest payable under Part VII in respect of the period before the date of the notice, is paid to the Commissioner on or before the 30th day after the date on which the notice of assessment is issued—

“the Commissioner shall cancel the taxpayer's liability to pay interest under Part VII for the period commencing on the day after the date on which the notice of assessment is issued and ending with the day on which payment is made, or the due date of the tax, whichever occurs first.

“(4)Where—

“(a)The Commissioner issues a statement of account to a taxpayer after the original due date for payment of tax to which the statement of account relates; and

“(b)The tax referred to in the statement of account, together with any interest payable under Part VII in respect of the period before the date of the statement of account, is paid to the Commissioner on or before the 15th day after the date on which the statement of account is issued, or the due date of the tax, whichever occurs first,—

“the Commissioner shall cancel the taxpayer's liability to pay interest under Part VII for the period commencing on the day after the date on which the statement of account is issued and ending with the day on which payment is made.

“(5)When the 30th day referred to in subsection (3) occurs on or before the 15th day referred to in subsection (4), the Commissioner shall cancel a taxpayer's liability to pay interest under Part VII for the period commencing on the date of issue of the notice of assessment and ending with the day on which payment is made.

“183DRemission consistent with collection of highest net revenue over time

“(1)The Commissioner may remit—

“(a)A late filing penalty; and

“(b)A late payment penalty; and

“(c)Interest under Part VII—

“payable by a taxpayer if the Commissioner is satisfied that the remission is consistent with the Commissioner's duty to collect over time the highest net revenue that is practicable within the law.

“(2)In the application of this section, the Commissioner must have regard to the importance of the late payment penalty, the late filing penalty, and interest under Part VII in promoting compliance, especially voluntary compliance, by all taxpayers with the Inland Revenue Acts.

“(3)The Commissioner must not consider a taxpayer's financial position when applying this section.”.

(2)Subsection (1) (except so far as it applies to section 183C(4) and (5)) is deemed to have come into force on 1 April 1997.

107Refund of tax paid on income subsequently exempted by Order in Council

“184

If a double tax agreement exempts from tax any income derived before the date of the Order in Council that gives effect to the double tax agreement, and the Commissioner is satisfied tax has been paid in relation to that income, and written application is made by or on behalf of the taxpayer at any time within 4 years after the date of the Order in Council, then notwithstanding anything in section MD 1 of the Income Tax Act 1994 the Commissioner may refund the tax paid.”.

111Requirements for accounting on payments basis

“(2)Where the Commissioner is satisfied (whether by a notification given by the registered person under section 53(1)(cb) of this Act or otherwise) that a registered person who has been directed to account for tax payable on a payments basis has ceased to satisfy the conditions set out in paragraphs (a) to (c) of subsection (1) of this section, the Commissioner shall either—”.

112Tax file number

“(2B)In any case where subsection (2A) of this section applies and the person who is deemed to be the supplier is not a registered person, the reference to the registration number of the supplier in paragraph (b) of subsections (3) and (4) of this section shall be read as if that reference were to the tax file number of the supplier.”.

“(2)Subject to sections 108A and 108B and Part IVA of the Tax Administration Act 1994, the Commissioner may from time to time and at any time make all such alterations in or additions to an assessment made under this section as the Commissioner thinks necessary to ensure the correctness of the assessment, notwithstanding that tax already assessed may have been paid.”.

(4)Subsections (1) and (2) are deemed to apply with respect to tax obligations, liabilities, and rights that are to be performed under or arise in relation to supplies made in respect of taxable periods commencing on or alter 1 April 1997.

114Deduction of tax from payment due to defaulters

“(2A)A notice of amount to be deducted or extracted issued under subsection (1) may include a daily amount of interest as well as the amount required to be deducted or extracted.

“(2B)The daily amount of interest notified under subsection (2A) shall be calculated for each day, commencing on the date of the notice and ending on the day on which the sum required by the notice is deducted or extracted.”.

115Group of companies

“(a)That member or the representative member of that group of companies notifies the Commissioner of that cessation pursuant to section 53(1)(d) of this Act; or”.

Part 4Amendments to Income Tax Act 1976

116Income Tax Act 1976

The Income Tax Act 1976 is amended by this Part.

117Gain or loss on disposal of depreciable property

(1)Section 117 is amended by inserting:

“(6A)Where property of a taxpayer is irreparably damaged, the consideration derived by the taxpayer on the disposition of the property is the amount of any insurance proceeds or indemnity payment or other consideration received in relation to that event, and subsection (7) does not apply.”.

(2)Subsection (1) applies in the 1993-94 and the 1994-95 income years, unless the taxpayer has before 17 June 1997 filed a return of income in which section 117(7) of the Income Tax Act 1976 has been applied in respect of that property.

118Dividends from qualifying company

(1)After section 393M(1) the following is inserted:

“(1A)For the avoidance of doubt, a dividend that is paid by a qualifying company to any trustee shareholder, and that is, or that becomes, beneficiary income of a beneficiary resident in New Zealand, is exempt income of the beneficiary to the same extent as if the beneficiary were the shareholder referred to in section 393M(1)(a), and the company had paid the dividend to the beneficiary.”.

“(1A)A notice of amount to be deducted or extracted issued under subsection (1) may include a daily amount of interest as well as the amount required to be deducted or extracted.

“(1B)The daily amount of interest notified under subsection (1A) shall be calculated for each day, commencing on the date of the notice and ending on the day on which the sum required by the notice is deducted or extracted.”.

Amendments to Tax Administration Act 1994

143Replacing sections in Tax Administration Act 1994

“138JWaiver of payment or security

The Commissioner may waive any requirement under section 138I for the payment of non-deferrable tax relating to any tax in dispute if the Commissioner considers that—

“(a)The payment of the tax (or the provision of security) before the end of the relevant period of deferral will unduly prejudice a taxpayer's business or personal circumstances; and

“(b)There is no risk to the revenue in waiving the payment (or the provision of security) until after the challenge is determined.

“138KDetermination of challenge not to affect other matters

The determination of a challenge by a hearing authority under this Part—

“(a)Relates solely to the matter that is the subject of the disputable decision being challenged; and

“(b)Does not affect the right of the Commissioner to make a disputable decision relating to a different matter and to amend the disputable decision being challenged in any way rendered necessary by the later disputable decision.”.

144Various amendments to Tax Administration Act 1994

(2)Section 120P is renumbered 120P(1) and the following subsection is added:

“(2)If gross income of a taxpayer is allocated to an income year under subsection (1)(b), the taxpayer shall allocate to the income year that proportion of deductions allowed in the allocation income year which the allocated gross income represents as a proportion of the gross income for the allocation income year calculated without allocation.”.